Spirit Airlines files for bankruptcy amid mounting losses and debt

Spirit Airlines announced Monday that it has filed for Chapter 11 bankruptcy protection, citing more than $2.5 billion in losses since 2020 and more than $1 billion in upcoming debt payments.

The move comes as the ultra-low-cost carrier struggles to recover from pandemic-related challenges and the collapse of a proposed merger with JetBlue Airways.

Despite its financial problems, Spirit plans to continue operating normally during the bankruptcy process. Customers can still book flights and travel without disruption, the Miramar, Florida-based airline said.

Rising costs and falling revenues

Spirit’s bankruptcy filing underscores a broader struggle to regain profitability. While passenger numbers increased by two percent in the first half of 2024 compared to last year, revenue per mile from fares fell nearly 20 percent, reflecting reduced fares.

On the other hand, labor costs have increased and a flurry of flights has driven down prices for leisure travel – Spirit’s primary market.

CEO Ted Christie acknowledged the financial strain in recent earnings calls, pointing to rising costs and a shift in customer demand.

“We are focused on refinancing our debt, improving our overall liquidity position, implementing our new re-imagined product in the market and expanding our loyalty programs.” Christie said, referring to bundled fares that include perks including bigger seats, free bags and in-flight amenities.

Analysts, however, warn that Spirit’s new strategy could alienate budget-conscious customers, its core audience, while failing to compete effectively with premium offerings from major airlines.

Engine problems and route cuts

Operational challenges have further compounded Spirit’s problems. Needed repairs to Pratt & Whitney engines have grounded several Airbus jets, forcing Spirit to lay off pilots and reduce its fleet availability.

In an unusual move, Spirit plans to cut its fourth-quarter schedule by nearly 20 percent compared to last year, an effort to stabilize fares. While that strategy may have benefited competitors including Frontier, JetBlue and Southwest Airlines, analysts say the reduction highlights Spirit’s continuing difficulty in maintaining market share.

Unsuccessful merger and industry trends

Spirit’s financial woes were exacerbated by the failed $3.8 billion merger with JetBlue. The deal was blocked earlier this year by the Justice Department, which argued it would harm competition and raise ticket prices for Spirit’s low-cost customers. Frontier Airlines also tried to merge with Spirit in 2022, but was outbid by JetBlue.

Spirit’s bankruptcy is the first of a major U.S. airline in more than a decade, marking a dramatic turnaround for the once-thriving budget carrier. Unlike industry giants including Delta and United, which used bankruptcy in the 2000s to successfully restructure, Spirit now faces significant challenges navigating fierce competition and changing market demands.

Whether Spirit can emerge from Chapter 11 and remain a viable competitor in the crowded U.S. airline industry remains uncertain.

This article includes reporting from the Associated Press